Adjusting to price of cotton seed

Monsanto introduced its genetically modified seed technology in 1996 and dramatically changed the way cotton is grown.

In 1995 most of the cotton grown in the Mid-South was based on conventional varieties and employed conventional tillage practices. In 2004 approximately 95 percent of the Mid-South cotton acreage was planted with genetically modified varieties and was based on conservation tillage or no-till production practices.

The new technology has reduced the number of trips over the field, reduced labor and equipment requirements per acre of cotton and stimulated the development of other new technology.

Mississippi State University cost of production estimates indicated that since the introduction of Monsanto's genetically modified seed technology (1996-2004), tractor hours per acre of cotton have been reduced by 49 percent and labor hours have been cut by 43 percent.

New harvesting technology, which eliminates boll buggies and module building (and the tractors that support them) and should be commercially available for the 2006 crop, is expected to increase the reduction in tractor hours to 74 percent and labor hours to 64 percent, relative to 1995 levels.

The worst thing a cotton farmer can do is fail to manage for a timely harvest. The most common cause of a delayed or untimely harvest is sublethal seeding disease. Growers should carefully consider all impacts of reducing the seeding rate and material dropped with the seed. Cutting seeding rate is a risk management decision which will vary by individual grower.

Monsanto and the seed companies are not simply selling seed — they are providing a simpler system of production that increases net returns (otherwise, the adoption rate of the new genetically modified seed technology would not approach 100 percent).

Growers can best counter high seed costs per acre by developing complete systems of production which reduce linear feet of rows per acre (change the planting pattern to utilize wider equipment, which improves labor and equipment cost per acre and reduces all inputs applied down the row) and by reducing the seeding rate (seed per foot), which lowers seed cost per acre and the cost of inputs dropped with the seed — typically in-furrow insecticides, and fungicides.

In 1995 the price of cottonseed was $0.84 per pound and the average planting rate was 10 pounds per acre. Cotton growers paid $8.40 per acre for their planting seed. In 2004, 10 pounds of BtRR cottonseed cost $14.90 and growers paid an additional tech fee of $3.82 per pound, bringing the total cost for planting seed to $53.10 per acre.

In 2005 cottonseed will be priced per thousand and not per pound. The average price of BtIIRR seed is expected to be $0.332 per thousand, and the BtIIRR tech fee is expected to average $1.08 per thousand. A maximum BtIIRR tech fee of $51 per acre is expected.

If a grower plants 47,000 BtIIRR seed per acre, his total cost for planting seed will be (47 × $0.332) + (47 × $1.08) or $66.37 per acre.

The marginal cost of increasing the seeding rate from 3.5 to 4.5 (29 percent) is small ($4.56 per acre of 7 percent).

While 25,000 to 35,000 uniformly spaced plants per acre does not reduce yield in small research plots, 25,000 plants per acre on commercial acreage and planted with many planters currently in use will likely result in a skippy stand which will reduce yield and delay maturity. A few growers tell me they are successfully dropping two to four seed per foot.

Cotton growers will try to save money by reducing their seeding rates. A reduction from an average of 4 to 3 (25 percent) reduces total seed cost per acre by $11 or 16 percent.

It is not my purpose to recommend a seeding rate. It is likely that many university and USDA and technical scientists will comment on seeding rates by planting pattern and soil type prior to the planting of the 2005 cotton crop. I will leave that matter to other researchers better qualified to address it.

My purpose is to share with the readers the economics of the adjustments that are currently under way on many cotton farms.

An effective change in planting pattern for many growers has been 38-inch solid to 30-inch 2×1 full skip. (The width of a six-row 30-inch 2×1 picker is 22.5 feet. The width of a six-row 38-inch 2×1 narrow skip (64-inch) picker is 25.5 feet. Therefore, it harvests more acres per hour and reduces harvest costs per acre. Some growers report that 38-inch 2×1 narrow skip does not reduce yield relative to 38-inch solid on their soil types. A major advantage of the 30-inch 2×1 planting pattern is associated with the cotton yield increase associated with corn as a rotation crop.)

Table 2 compares the cost of a 38-inch solid system with a 30-inch 2×1 full skip system (both built around a 12-row planter and a six-row picker). It is assumed that the picker conversion (solid to skip row) costs $5,000. The seeding rate for the 38-inch solid system of 4 seed per foot of row is reduced to 3 (25 percent) for the 30-inch 2×1 system. Cotton grown in a 30-inch 2×1 planting pattern has 11,616 linear feet of row per acre (84 percent of 38-inch solid).

Some cost items, such as materials applied by air and fertilizer, are unchanged.

My experience has been that cotton grown in a 38-inch solid pattern and yielding 700 pounds per acre in northeast Mississippi, yielding 900 pounds in west Tennessee, and yielding 1,200 pounds along Deer Creek in the south Mississippi Delta all yield slightly more when converted to a 30-inch 2×1 pattern. Table 2 reflects equal yields.

Changing the planting pattern and reducing the seeding rate reduces total specified expenses by $60.13 per acre (12 percent). With a yield of 825 pounds of lint per acre, price per pound of lint of $0.64, and price per pound of seed of $0.04 (1.55 pounds of seed per pound of lint), returns above total specified expenses are $77.58 per acre.

Total specified expenses do not include the cost of land, management, or general farm overhead. Therefore, a 76 percent change in returns above specified expenses is not a 76 percent improvement in profits. The point is, however, any cost reduction without a yield reduction, goes directly into profits.

Although 38-inch solid is a very popular planting pattern, the expenses reported in Column 2 (38-inch solid) of Table 2 vary by individual grower and the adjustments to 30-inch 2×1 will vary. The best example is plant growth regulators (PGR). The cost of $7.08 per acre reflects 14 ounces of a generic product at $0.48 per ounce. More expensive substitutes are preferred by some growers.

The savings of $1.13 per acre reported in Table 2 adjusts the $7.08 cost for linear feet of row per acre. Most growers will use fewer ounces per acre on skip row than solid cotton, and some growers will only treat the terminals of cotton plants grown in a skip row pattern.

Growers with yield in excess of 825 pounds of lint per acre typically use more than 14 ounces per acre on solid-planted cotton. A few growers apply no PGR.

Growers considering a change in planting patterns and/or seeding rates should consult with experienced growers in their area.

Dave Parvin is a professor of agricultural economics at Mississippi State University